Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications Modelling Movements in Individual Consumption: A Time Series Analysis of Grouped Data

Modelling Movements in Individual Consumption: A Time Series Analysis of Grouped Data

Journal article

We characterize the time-series properties of group-level consumption, income, and interest rates using microdata. We relate the coefficients of moving average representations to structural parameters of theoretical models of consumption behavior. Using long time series of cross sections to construct synthetic panel data for the United Kingdom, we find that for high-educated individuals the Euler equation restrictions are not rejected, the elasticity of intertemporal substitution is higher than one, and there is evidence of “excess smoothness” of consumption. Low-educated individuals, conversely, exhibit excess sensitivity of consumption to past income, and the elasticity of intertemporal substitution is not statistically different from zero.

Deaton inequality website

More on this topic

IFS Working Paper W22/22
This paper describes methods to optimally choose the number of treatment and control clusters, and the number of units within treatment and control clusters, allowing for full flexibility.
IFS Working Paper W22/13
We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage.
Briefing note
This briefing note compares trends in output, consumer spending and saving from the 2020 recession with those from two previous recessions beginning in 1990 and 2008.
IFS Working Paper WP19/29
This paper investigates how diļ¬€erent income shocks shape consumption dynamics over the business cycle. First, we break new ground by creating a unique, panel dataset of transitory and permanent income shocks, using subjective income expectations from the Dutch Household Survey.
IFS Working Paper WP19/24
I characterize how house price shocks affect consumption inequality using a life-cycle model of housing and non-housing consumption with incomplete markets.